Crunching the numbers: Courts square off over the Telephone Consumer Protection Act

April 2015  |  EXPERT BRIEFING  |  LITIGATION & DISPUTE RESOLUTION

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The Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227 et seq., was enacted in 1991 and was intended to protect consumers from aggressive telemarketers. The TCPA regulates, among other things, businesses calling consumers on their wireless or cellular telephones using an “automatic telephone dialing system” (ATDS). The TCPA defines ATDS as “equipment which has the capacity – (a) to store or produce telephone numbers to be called, using a random or sequential number generator; and (b) to dial such numbers”. Under the TCPA, text messages are considered calls. When Congress enacted the TCPA, it directed the Federal Communications Commission (FCC) to prescribe regulations implementing the TCPA’s requirements, and, most recently courts have disagreed on how much the FCC’s authority to clarify and comment on the definition of an ATDS binds them.

For many years, courts have been following the FCC’s 2003 commentary interpreting the definition of ATDS broadly as “any equipment that has the specified capacity to generate numbers and dial them without human intervention regardless of whether the numbers called are randomly or sequentially generated or come from calling lists”. In re Rules and Regulations Implementing the TCPA, 27 F.C.C.R. 15391, 15392 n. 5 (2012). Notably, the FCC’s 2003 commentary putting forth this broad definition of ATDS addressed the argument that all predictive dialers, which predict when a call centre agent will be available to handle a call and then automatically dial the call from a list of telephone numbers, as a general matter did not fall within statutory definition of ATDS because they did not dial random or sequential numbers. It rejected this argument, stating that it would “lead to an unintended result”. In re Rules and Regulations Implementing the TCPA, 18 F.C.C.R. 14014, 14092 (2003). The FCC did not want predictive dialers, typically used by telemarketers, which “can dial thousands of numbers in a short period of time”, to have a blanket exemption from the TCPA. See id.

Recently, in Marks vs. Crunch San Diego, LLC, ---F. Supp. 3d ---, 2014 WL 5422976 (S.D. Cal. Oct. 23, 2014), a federal district court held that it did not have to consider the FCC’s interpretation of ATDS, followed by so many other courts, when granting the defendant’s motion for summary judgment because the FCC “has no authority to modify or definitively interpret any language in § 227(a) of the TCPA”.

In Crunch, the plaintiff, a Crunch gym member, alleged that he received three unwanted promotional text messages from Crunch on his cellular phone in violation of the TCPA. Crunch sent those text messages using a third-party web-based platform whereby phone numbers were inputted into the platform by one of three methods: (i) when Crunch manually uploaded a phone number onto the platform; (ii) when an individual responded to a Crunch marketing campaign via text message; and (iii) when an individual manually inputted the phone number on a consent form through Crunch’s website. Crunch would select the desired phone numbers, generate a message to be sent, select the date the message would be sent, and then the platform would send out the text message to the specified phone number on that date. The system had the capability to store phone numbers in the event Crunch wanted to send out additional text messages to the same numbers. Crunch moved for summary judgment based on the fact that its platform did not constitute an ATDS under § 227(a) of the TCPA because it “lacks the capacity to store or produce telephone numbers to be called using a random or sequential number generator”.

The district court agreed. The Crunch court held that “the platform used by [Crunch] does not have the present capacity to store or produce numbers to be called, using a random or sequential number generator, and to dial those numbers. Numbers can only enter the system through one of the three methods listed above, and all three methods require human curation and intervention. None could reasonably be termed a ‘random or sequential number generator.’” The Crunch court’s holding flows directly from its literal interpretation of the statutory definition of ATDS in the TCPA. The Crunch court ruled that it did not have to consider the FCC’s broader interpretation of ATDS because the Ninth Circuit in Satterfield vs. Simon & Schuster, Inc., 569 F.3d 946, 951 (9th Cir. 2009) already determined that the definition of ATDS found in the TCPA was “clear and unambiguous” and that FCC therefore “does not have the statutory authority to change the TCPA’s definition of an ATDS”.

By contrast, the federal district court in Johnson vs. Yahoo!, Inc., 2014 WL 7005102 (N.D. Ill. Dec. 11, 2014) held that it was bound by the FCC’s broad interpretation of ATDS when it denied Yahoo!’s request for summary judgment on text messages sent by similar technology as in Crunch. Acknowledging that there was a conflict between the FCC’s interpretation of ATDS and the plain language of the statute, the Yahoo! court held that it was nevertheless bound by the FCC’s interpretation because of a statute called the Hobbs Act, which provides that federal appellate courts (as opposed to district courts) have exclusive jurisdiction to review and determine the validity of FCC orders. As a district court, the Yahoo! court decided that it could not disregard the FCC’s definition of ATDS without running afoul of the Hobbs Act. Notably, the Yahoo! court considered the implications of the Hobbs Act, while neither the Crunch court nor Satterfield mentioned it. Ultimately, the Yahoo! court did not go as far to find that Yahoo!’s technology definitively constituted an ATDS under the FCC’s definition, but instead only determined that there was sufficient evidence to raise triable issues of fact precluding summary judgment for Yahoo!.

It remains to be seen if moving forward courts will, like Crunch, find ways to either discount or disregard the FCC’s commentary on the TCPA when it conflicts with the plain language of the statute or, like Yahoo! stay faithful to the FCC’s broad definition of ATDS. See, e.g., Glauser vs. GroupMe, Inc., 2015 WL 475111 (N.D. Cal. 2015) (holding that the FCC’s broad interpretation of ATDS is binding but nevertheless granting summary judgment in favour of the defendant in a text messaging case because the technology used to send the text messages could not be used without “human intervention”.) One way to potentially reconcile Crunch with the FCC’s definition of ATDS is that the FCC’s definition deals with predictive dialers and not text messaging platforms, which are a completely different technology because there is no function predicting agent availability. A way to view Crunch as not running afoul of the Hobbs Act is to narrowly interpret what is a final order of the FCC to exclude the related commentary, or to find that contesting an FCC interpretation in a civil action between private parties is not an attempt to “enjoin, set aside or suspend” that order as prohibited by the Hobbs Act, unless the FCC is a party to the action. See 28 U.S.C. § 2342.

The rapid advent of technology in this area has caused much confusion for businesses as to what specific conduct is covered by the TCPA and, in recent years has caused a prolific rise in TCPA lawsuits, which are up 560 percent between 2010 and 2014. In Re: Rules and Regulations Implementing the TCPA, Dkt. No. 02-278 (Feb. 2, 2015.) While originally enacted as a well-meaning statute to protect consumers from random or sequentially-dialed calls, enterprising plaintiffs’ attorneys have, at least according to some business groups, abused the law to rake in attorney fees as TCPA cases are typically filed as class actions seeking a minimum of $500 in statutory damages per violation. Id. One can hypothesise that the Crunch court’s decision to rely strictly on TCPA’s definition of ATDS was an effort to stem the tide on the tsunami of TCPA litigation currently clogging the courts, id., and that other courts will likely seek to avoid unreasonable FCC commentary on TCPA issues. In any event, privacy lawyers on both sides will most certainly be following this issue closely, and it remains to be seen if the FCC will provide further guidance and clarification on the definition of ATDS that encompasses the text messaging technology at issue in Crunch and Yahoo!.

Perrie M. Weiner and Edward D. Totino are partners, and Monica D. Scott is an associate, at DLA Piper. Mr Weiner can be contacted at +1 (310) 595 3024 or by email: perrie.weiner@dlapiper.com. Mr Totino can be contacted on +1 (310) 595 3025 or by email: edward.totino@dlapiper.com. Ms Scott can be contacted on +1 (310) 595 3011 or by email: monica.scott@dlapiper.com.

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Perrie M. Weiner, Edward D. Totino and Monica D. Scott

DLA Piper